The U.S. Small Business Administration (SBA) has issued a call inviting experienced early stage fund managers to submit the Small Business Investment Company (SBIC) Management Assessment Questionnaire (MAQ) for consideration by the SBA to be licensed as Early Stage Small Business Investment Companies. The MAQ consists of SBA Form 2181 and the exhibits in SBA Form 2183, which cover information on the management team, the proposed strategy for the SBIC Fund, the fund managers' investment track record, and the proposed fund structure and economics.
SBA has established two “tracks” for the Early Stage SBIC licensing process. Track 1 applies to applicants that have signed commitments for at least $15 million in Regulatory Capital and have the remaining capital needed to achieve the minimum $20 million in Regulatory Capital for Early Stage SBICs “soft-circled.” Track 1 MAQs are due on March 1, 2013, with Green Light decisions anticipated by April 30, 2013. A Track 1 applicant with at least $20 million in Regulatory Capital desiring to be licensed by September 30, 2013 who receives a Green Light letter must file a licensing application by June 7, 2013. Track 2 is for all other applicants. Track 2 MAQs are due on March 30, 2013, with Green Light decisions anticipated to be made by September 27, 2013. A Track 2 applicant who receives a Green Light letter must file a licensing application no later than one year from the issuance of the Green Light letter.
Early Stage SBICs must invest at least 50 percent of their investment dollars in early stage small businesses. An early stage small business is one that has never achieved positive cash flow from operations in any fiscal year.
Licensed Early Stage SBICs may receive SBA-guaranteed debenture leverage of up to 100 percent of the Regulatory Capital, up to a maximum of $50 million. By providing SBA guaranteed leverage to Early Stage SBICs, SBA seeks to expand entrepreneurs’ access to capital and thereby encourage innovation and job creation.
The private equity practice group at McGuireWoods LLP is dedicated to keeping clients advised of new legislative and business developments as they occur. If you have any questions regarding these issues, please feel free to contact Mark A. Kromkowski (312.849.8170), Bryan P. Bylica (312.750.3617), your primary attorney at McGuireWoods LLP, or any of the authors.